A market base for pension cost measurement

Article Abstract:

Pension cost accounting is an important issue for employers in view of the considerable impact of such costs on their financial resources. The set of standards governing pension costs, SSAP 24 (Accounting for Pension Costs), is currently being reviewed by the Accounting Standards Board (ASB). As part of the initial phase of the review process, the ASB has published a discussion paper titled 'Pension Costs in the Employer's Financial Statements.' This document evaluates possible methods of pension cost accounting and measurement. The assumptions and methods examined are grouped under two general headings, the preferred or actuarial approach and the alternative or market-based approach. The discussion paper also proposes several changes to SSAP 24, including the adoption of new rules for refunds and disclosures.

Accounting Standards Board

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Realism or just number-crunching?

Article Abstract:

Two of the International Accounting Standards Committee's (IASC) proposals on pensions do not reflect business realities and are likely to result in more problems later on. These proposals are contained in E 54, 'Employee Benefits.' The first recommends the creation of a mandatory 'corridor' of 10% of assets or liabilities, which will trigger immediate and full recognition of gains and losses when breached. The second proposal pertains to the method of valuing pension fund liabilities. The IASC recommends the use of a risk-free discount rate, which is not consistent with the current thinking and practice of finance directors. International accountants should team up with their international actuarial colleagues to develop a more acceptable alternative to the E 54 proposals.

International Accounting Standards Board

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Statement of Standard Accounting Practice 24: accounting for pension costs

Article Abstract:

Statement of Standard Accounting Practice 24: accounting for pension costs, is presented. Topics covered include: types of pension plans, actuarial considerations, funding plan, defined benefit plans, regular pension costs, increases to pensions and deferred pensions, and deferred taxation. Terms such as standard accounting practice are defined, and legal requirements in Great Britain and Northern Ireland are enumerated.

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